Sunday, November 01, 2009

When Economists Lie, You Know It's Bad

Geithner is lying and Greenspan before him.

Money is a medium of exchange but in fact has no real intrinsic value. At one time, you could present money at a bank and exchange it for a set amount of gold or silver. After that stopped being true, the only value money represented was the trust that those using money as a medium of exchange had in the issuing entity. In this country, that entity is the United States Treasury. When there is no actual backing of the currency by anything of real value, great care must be taken to control the amount of currency introduced into the monetary system and even then, the Treasury can get into trouble.

A government must not abuse it's authority to issue money. The money that a government spends, must be no more than the amount it takes as revenue from the fees and taxes that it levees. If the government must spend more money than it currently has, it must borrow that money like anybody else and pay it back at the agreed upon rate of interest in a timely manner.

Governments exist to provide order and organization in society. By doing so, they enable the citizens to live together peacefully. The citizens engage in all of the various enterprises of industry and commerce that allow society to continue and prosper. When industry and commerce are no longer sufficient to allow society to prosper the people suffer and become discontent. They may blame the government for their suffering and in truth, if the government has been remiss in its management of its own finances, it may bear some of the blame. Government can become fearful that the populace, in it's discontent, will rise up against it. When this happens, they can do a couple of things. They can institute repressive and coercive measures upon the people in an effort to control any rebellious behavior. They can attempt to buy the people off by providing the necessary resources that the people need to exist at what they perceive to be an acceptable level, that they used to obtain by engaging in industry and commerce. In the end, neither of these actions is effective.

Currently, our government is afraid of it's citizens. It is attempting to buy the citizens off by injecting debased currency into the system, although I'm not sure how you can debase currency that isn't really worth anything in the first place. This won't work for long. They know it won't. This makes them more scared. The repression will come next.

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